Chapter 612

612.01(1)(a) (a) To preserve and encourage cooperative low-cost insurance;

612.01(1)(b) (b) To establish a framework in which mutuality in its true sense can be preserved, and small mutual corporations can be kept viable;

612.01(1)(c) (c) To preserve and strengthen the interest of the members in and their control of town mutuals;

612.01(1)(d) (d) To enable town mutuals to satisfy as many of the essential insurance needs of their members as is consistent with the other objectives of chs. 600 to 646; and

612.01(1)(e) (e) To provide financial guaranties sufficient to ensure the solidity of town mutuals, and to encourage them to maintain adequate surpluses.

612.01(2) (2) Scope. Except as otherwise provided, this chapter applies to all corporations organized under this chapter.

612.01(3) (3) Interpretation. Whenever a section of ch. 611 is applied to town mutuals by this chapter, the portion to be applied is that portion applicable to a mutual under ch. 611.

612.01(4) (4) Applicable definitions. The definitions in ss. 181.0103 (3) and (18), 600.03 and 610.01 (1), (2) and (4) apply to town mutuals.

612.01 History History: 1973 c. 22; 1977 c. 339; 1979 c. 89, 102, 177; 1983 a. 189 s. 329 (22); 1983 a. 215; 1985 a. 189; 1997 a. 79.

612.02 612.02 Organization of town mutuals.

612.02(1) (1) Incorporating members. A town mutual may be organized by 100 or more adult natural persons each of whom owns an interest in a separate insurable risk in the territory described in sub. (2) (c), and each of whom agrees to insure those risks in the town mutual, at least against damage by fire.

612.02(2) (2) Articles of incorporation. The articles shall state:

612.02(2)(a) (a) The name of the corporation;

612.02(2)(b) (b) The address of the principal office, which may be designated as the residence or business office of the holder of a specified corporate office;

612.02(2)(c) (c) The territory within which the corporation plans to operate which may not exceed 8 contiguous counties, except that the commissioner may authorize a broader territory aggregating no more than 16 contiguous counties;

612.02(2)(d) (d) The types of insurance to be written which shall conform to s. 612.31;

612.02(2)(e) (e) The number of directors and the manner of their selection and of their replacement if there are interim vacancies;

612.02(2)(f) (f) The titles of the officers, their terms of office and the manner in which they are to be selected;

612.02(2)(g) (g) The procedures and quorum requirements for the annual and special meetings and the voting rights of the members;

612.02(2)(h) (h) The general conditions and procedures for levying assessments; and

612.02(2)(i) (i) The procedures for amending the articles and for adopting and amending bylaws.

612.02(3) (3) Model articles. The commissioner shall promulgate model articles of incorporation which may be used by any town mutual.

612.02(4) (4) Application for certificate of authority. The incorporating members shall file with the commissioner an application for a certificate of authority which shall be signed by or on behalf of each incorporating member and shall include or have attached:

612.02(4)(a) (a) The names and addresses of all incorporating members and, for the preceding 10 years, the names, all addresses and all occupations of all proposed directors and officers;

612.02(4)(b) (b) The proposed articles which shall be signed by each incorporating member, and the proposed bylaws;

612.02(4)(c) (c) The affidavit of 2 incorporating members stating that they are personally acquainted with all incorporating members and know them to be owners of property described under sub. (1) and to be the signers of the application and the articles;

612.02(4)(d) (d) All agreements relating to the corporation to which any incorporating member or any proposed director or officer is a party;

612.02(4)(e) (e) The amount and sources of the funds available for organization expenses and the proposed arrangements for reimbursement of incorporating members;

612.02(4)(f) (f) The proposed compensation of directors and officers;

612.02(4)(g) (g) The plan for conducting the insurance business including:

612.02(4)(g)1. 1. The types of insurance to be written;

612.02(4)(g)2. 2. The policy forms to be used initially;

612.02(4)(g)3. 3. The proposed methods for soliciting members;

612.02(4)(g)4. 4. The proposed methods for establishing premium rates and classifications for assessments;

612.02(4)(g)5. 5. Any proposed reinsurance arrangements; and

612.02(4)(i) (i) Such other relevant documents or information as the commissioner reasonably requires.

612.02(5) (5) Initial surplus.

612.02(5)(a) (a) Requirement. The incorporating members shall pay in or procure an initial surplus in an amount at least as large as that specified by the commissioner. The amount specified by the commissioner shall be sufficient to permit the town mutual to commence business and to protect the members in case initial losses are unexpectedly high, but may not be less than $100,000 nor more than $200,000. The surplus may be provided by gifts or by contribution notes bearing interest at a rate approved by the commissioner and repayable under par. (c).

612.02(5)(b) (b) Factors determining amount of initial required surplus. In determining the amount of initial required surplus, the commissioner shall consider all factors relevant to the financial needs of the corporation, including the matters specified in sub. (4) (e) and (g), the number of incorporating members, the nature of their properties and financial position and the general economic situation.

612.02(5)(c) (c) Repayment of contribution notes. No payment on principal or interest on contribution notes may be made without approval of the commissioner. The commissioner shall approve if after payment there will remain surplus in an amount sufficient for the continuing needs of the corporation and to satisfy all other requirements of the law.

612.02(6) (6) Certificate of authority. The commissioner shall issue a certificate of authority if he or she:

612.02(6)(a) (a) Finds that all requirements of law have been met;

612.02(6)(b) (b) Is satisfied that the proposed directors and officers are trustworthy and individually competent for the tasks assigned them and that collectively they have the competence and experience to administer the affairs of the proposed town mutual;

612.02(6)(c) (c) Is satisfied that the total amount initially at risk and its distribution permit a sound insurance operation; and

612.02(6)(d) (d) Is satisfied that the business plan is consistent with the interests of the members and of the public.

612.02(7) (7) Contents of certificate. The certificate of authority shall specify the territories and types of insurance authorized and the surplus required under sub. (5).

612.02(8) (8) Effect of certificate. Upon issuance of the certificate of authority, the town mutual shall have legal existence.

612.02 History History: 1973 c. 22; 1979 c. 102 ss. 114, 236 (5), (7); 1985 a. 189; 2015 a. 90; 2015 a. 197 s. 51.

612.03 612.03 General powers and effect of unauthorized corporate acts. Sections 181.0302 (intro.), (1) to (8), (11) to (13), (18) and (19) and 181.0304 apply to town mutuals, except that references to “attorney general” shall be read as “commissioner”. Section 181.0302 (7) is subject to s. 612.35.

612.03 History History: 1973 c. 22; 1979 c. 110; 1983 a. 192; 1987 a. 13; 1997 a. 79.

612.04 612.04 Amendments of articles, bylaws and business plan.

612.04(1) (1) Right to amend articles and make and amend bylaws. Sections 181.0207 and 181.1001 apply to town mutuals. A town mutual may make and amend bylaws as provided by the articles or, in the absence of any such provision, in the same manner as the articles may be made or amended.

612.04(2) (2) Approval required. No change in the articles or bylaws or in the business plan is effective until approved by the commissioner, nor may a town mutual depart from its business plan except with the commissioner’s approval. No change may be made inconsistent with s. 612.02 (2). Section 181.1008 applies to town mutuals.

612.04(3) (3) Grounds for disapproval. The commissioner shall approve the change unless he or she finds, after a hearing, that it would be:

612.04(3)(a) (a) Contrary to law; or

612.04(3)(b) (b) Inconsistent with the interests of the members or of the public.

612.04 History History: 1973 c. 22; 1977 c. 203; 1979 c. 102 ss. 115, 236 (5); 1997 a. 79.

612.10 612.10 Membership.

612.10(1) (1) Creation and duration of membership. Each policyholder is a member of the town mutual and has all the rights and duties of a member during the time his or her policy is in effect. The articles or bylaws may establish rules determining which of multiple policyholders on the same policy shall exercise voting rights or how such multiple policyholders may divide voting rights among them.

612.10(2) (2) Mortgagee not a member. A person having rights merely by reason of a mortgagee clause included in or attached to a policy does not thereby become a member.

612.10 History History: 1973 c. 22; 1979 c. 102 s. 236 (13).

612.11 612.11 Meetings of members.

612.11(1) (1) Place of meetings. All meetings of members shall be held within the territorial limits of the town mutual, except under s. 612.21 (4).

612.11(2) (2) Notice of meeting.

612.11(2)(a) (a) Annual meeting. Notice of the time and place of the annual meeting shall be given to each member by printing it conspicuously on each policy or in any other reasonable manner that the commissioner approves. A change in time or place may be made by the board of directors by giving notice at least 10 days prior to the original date and 30 days prior to the new date.

612.11(2)(b) (b) Special meetings. Notice of special meetings shall be given to members at least 30 days prior to the date of the meeting, and shall state the proposed business to be brought before the meeting.

612.11(3) (3) Commissioner’s right to attend. The commissioner may attend any meeting of members.

612.11 History History: 1973 c. 22; 1997 a. 79.

612.12 612.12 Voting rights of members.

612.12(1) (1) Matters subject to vote. Members of town mutuals shall have the right to vote on the following matters:

612.12(1)(a) (a) Election of directors;

612.12(1)(b) (b) Amendment of articles;

612.12(1)(c) (c) Merger, transfer of business under s. 612.24, conversion and voluntary dissolution;

612.12(1)(d) (d) Any decision by the town mutual to transact insurance for which reinsurance is required under s. 612.33 (2), unless such insurance is totally reinsured; and

612.12(1)(e) (e) Other matters specified in the articles or bylaws.

612.12(2) (2) Special notices and majorities. No resolution on any of the matters specified in sub. (1) (c) or (d) is effective unless notice of the matter has been given as required for a special meeting under s. 612.11 (2) (b); nor unless it is approved by at least 25 members and by two-thirds of the members voting on the resolution.

612.12(3) (3) Nominating procedures. The articles or bylaws may provide for nominating committees, and for their procedures. Nominations from the floor may not be excluded.

612.12(4) (4) Voting procedures.

612.12(4)(a) (a) Allocation of votes. Except under s. 612.10 (1), each member is entitled to one vote. No person may have more than one vote regardless of the number of policies issued to that person.

612.12(4)(b) (b) Proxies. No member may vote by proxy.

612.12(4)(c) (c) Mail voting. The articles or bylaws may provide that votes may be cast by mail, and may prescribe the voting procedure. If voting by mail is authorized, a ballot shall be sent to each member at least 30 days before the meeting at which the decision is to be made, setting out the exact question to be voted upon. A vote signed by a member and delivered before the meeting in accordance with the prescribed voting procedure is equivalent to a vote at the meeting. No question on which there is voting by mail may be amended in any way at the meeting.

612.12 History History: 1973 c. 22; 1991 a. 316; 1997 a. 79.

612.13 612.13 Directors and officers.

612.13(1) (1) Number and classification. Town mutuals shall have at least 5 directors divided into 3 classes as nearly equal in size as possible.

612.13(1m) (1m) Inside directors.

612.13(1m)(a) (a) Beginning 2 years after April 30, 2004, all of the following apply:

612.13(1m)(a)1. 1. If a town mutual has fewer than 9 directors, no more than one director may be an employee or representative of the town mutual.

612.13(1m)(a)2. 2. Employees and representatives of a town mutual may not constitute a majority of its board.

612.13(1m)(b) (b) Notwithstanding par. (a), the commissioner may allow a town mutual an extension of up to one year to come into compliance with the requirements under par. (a).